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Franklin American Mortgage Co. v. The University National Bank of Lawrence

United States Court of Appeals, Sixth Circuit

December 6, 2018

Franklin American Mortgage Company, Plaintiff-Appellee,
v.
The University National Bank of Lawrence, Defendant-Appellant.

          Argued: October 18, 2018

          Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 3:13-cv-01109-Bernard A. Friedman, District Judge.

         ARGUED:

          Anthony V. Narula, AXS LAW GROUP, PLLC, Miami, Florida, for Appellant.

          Charles M. Cain, II, CAIN LAW FIRM, Franklin, Tennessee, for Appellee.

         ON BRIEF:

          Anthony V. Narula, AXS LAW GROUP, PLLC, Miami, Florida, for Appellant.

          Charles M. Cain, II, CAIN LAW FIRM, Franklin, Tennessee, for Appellee.

          Before: MERRITT, COOK, and LARSEN, Circuit Judges.

          OPINION

          LARSEN, CIRCUIT JUDGE.

         Franklin American Mortgage Company (FAMC) purchased two loans from the University National Bank of Lawrence (UNB) and promptly resold them to Wells Fargo. Years later, Wells Fargo discovered defects in UNB's underwriting and demanded that FAMC repurchase the loans or indemnify Wells Fargo for its losses. FAMC similarly demanded that UNB indemnify FAMC for its payments to Wells Fargo in accordance with their agreement. UNB refused. The district court granted summary judgment to FAMC on its breach of contract claims against UNB. We now AFFIRM that judgment.

         I.

         FAMC and UNB entered into a Correspondent Loan Purchase Agreement (Agreement) in 2005, by which FAMC agreed to purchase mortgage loans from UNB. In exchange, UNB made certain representations and warranties about the loans it would sell, including that "[t]here [would be] no fact or circumstance with respect to the Mortgage Loan that would entitle" a subsequent purchaser "to demand repurchase of a Mortgage Loan" from FAMC. UNB also agreed to repurchase any mortgage loans if one of its representations or warranties turned out to be false or if a subsequent buyer required that FAMC repurchase the mortgage loan. Additionally, UNB promised to indemnify FAMC for "any and all losses" that FAMC incurred due to "[a]ny misrepresentation" or breach "of any of the . . . representations, warranties, or obligations under this Agreement" by UNB.

         The parties agreed that Tennessee law would govern the Agreement. FAMC and UNB later modified the original Agreement with a Delegated Underwriting Agreement (Modification) in which UNB agreed to perform the underwriting for loans it sold to FAMC.

         At issue here are two loans UNB sold to FAMC-one sold in 2006 (the "Salvino Loan") and one sold in 2007 (the "Turner Loan"). Per the parties' arrangement, UNB underwrote both loans. FAMC promptly resold both to Wells Fargo. In February and March 2010, Wells Fargo notified FAMC that it had identified defects in the underwriting for both loans, including missing documents and income miscalculations. After internal appeals in which FAMC disputed some of the defects and tried to resolve others, Wells Fargo demanded that FAMC repurchase the Salvino Loan and indemnify Wells Fargo for its losses arising from the Turner Loan.[1] FAMC did so in November 2010 (Salvino Loan) and August 2011 (Turner Loan), paying Wells Fargo a total of $231, 225.33 for the two loans.

         After satisfying its repurchase and indemnification obligations to Wells Fargo, FAMC invoked the Agreement to demand repurchase and indemnification from UNB. UNB refused to repurchase the Salvino Loan or indemnify FAMC for either. To cut its losses, FAMC resold the Salvino Loan to a third party for $42, 278.48.

         In 2013, FAMC filed a complaint alleging that UNB's refusal to repurchase or indemnify had breached their Agreement. FAMC moved for summary judgment on its claims; UNB made a cross-motion for summary judgment on several affirmative defenses, including its claim that the statute of limitations had run. The district court granted summary ...


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